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What is Libor?Libor, or the daily London interbank offered rate, is a key benchmark rate that reflects how much it costs banks to borrow from each other. It is the reference rate for about $350,000bn of financial products, meaning that small moves up or down can have significant knock-on effects.

At Barclays, regulators are focusing on whether communications between traders at the bank and its treasury department, which submits its daily borrowing costs, violated rules, known as “Chinese walls”, designed to restrict information sharing between different parts of the bank, according to sources familiar with the probe.

Investigators are specifically looking at whether traders improperly influenced the daily submission process, according to those sources.

Regulators are also looking at whether some banks might have submitted artificial rates to cloak their true borrowing costs. UBS, Bank of America, Citigroup and WestLB have received subpoenas or requests for information from regulators in connection with the investigation.

What are “Chinese walls”?

Investment banks routinely use information-sharing restrictions to prevent bankers and traders in one part of a group profiting from price-sensitive inside information about activities in other parts of the bank. That applies to big mergers and acquisitions deals or initial public offerings as well as data on what a bank’s daily interbank borrowing costs may be.

How could Libor be manipulated?

The British Bankers’ Association, which sponsors the rate and uses Thomson Reuters to crunch the data, says that it would be almost impossible for a single bank to manipulate it.

Libor rates for short-term borrowing are published daily in 10 currencies across 15 periods – ranging from overnight to 12 months.

The association surveys banks about the rates at which they believe they can borrow “in a reasonable market”. The top and bottom quartile of reported rates are then dropped, with the average of the remainder used for index purposes – reducing the influence of a single institution.

Market participants and academics have repeatedly questioned the mechanism, pointing to a lack of transaction information to back up banks’ submissions as well as odd patterns that emerged during the financial crisis.